advanced accounting chapter 20 exercises1-3

der/d0243ecd-6458-4d22-b4ab-d805824ec167/page/7afdod43-30db-4a86-9661-afc4a7f25830 e300k: Advances ACCOLTINE EXERCISES Exercise 1 (LO 3) Allocating legacies. Calvin Hughes's will provided for the following distributions: a. The 40-acre parcel in Leona, Wisconsin, is to be given to The Nature Conservancy along with $50,000. b. My 1970 GTO Pontiac convertible along with my 1937 Chevrolet pickup truck are to be given to the "Piston Auto Club" located in Slinger, Wisconsin. C. The collection of Zuni Kachina dolls is to be given to my nephew William Hughes. d. My Northwestern Mutual insurance policy number 14378 has named my son Calvin, Jr., as beneficiary. Policy number 48002 has named the estate as beneficiary. However, I want my sister Roberta and my brother Roger to each receive $30,000 from the policy proceeds. e. My residence at 110 Hillcrest Road is to be given to the Riveredge Nature Center located in Newburg, Wisconsin, provided that the center has not already grown to include more than 500 acres. f. My grandchildren, Riley, Corey and Toby, are to receive $50,000 each for the purpose of hopefully funding their college education. This bequest is not contingent upon their going to college or having already finished college & The balance of my estate is to be divided equally between my son Calvin, Jr., and my daughter, Susan Determine the amount of cash to be received by the decedent's grandchild Riley and his son Calvin Hughes, Jr., under each of the following scenarios: Scenario A: The following additional information is available at the date of death: the estate only consisted of $40,000 cash, William Hughes was deceased, the Kachina collection was sold for $45,000, insurance policy number 14378 had a death bencfit of $50,000, insurance policy number 48002 had a death benefit of $40,000, Riveredge Nature Center consisted of 560 acres, and the residence at 110 Hillcrest Road was sold for $220,000, Scenario B: The following additional information is available at the date of death: the estate only consisted of $15,000 cash, William Hughes was thrilled to receive the Kachina collection which was valued at $45.000, insurance policy number 14378 had a death benefit of $50,000, insurance policy number 002 had a death benefit of $40.000, Riveredge Nature Center con sisted of 160 acres, and the residence at 110 Hillcrest Road was sold for $220,000 Exercise 2 (10.0 Distribution of estate, taxable estate, and the resulting tax. ez cokdance Accounting 500 acres. Newburg, Wisconsin, provided that the center has not already grown to include more than f. My grandchildren, Riley, Corey and Toby, are to receive $50,000 each for the purpose of hopefully funding their college education. This bequest is not contingent upon their going! to college or having already finished college The balance of my estate is to be divided equally between my son Calvin, Jr., and my daughter, Susan Determine the amount of cash to be received by the decedent's grandchild Riley and his son Calvin Hughes, Jr., under each of the following scenarios: Scenario A: The following additional information is available at the date of death: the estate only consisted of $40,000 cash, William Hughes was deceased, the Kachina collection was sold for $45,000, insurance policy number 14378 had a death benefit of $50,000, insurance policy number 48002 had a death benefit of $40,000, Riveredge Nature Center consisted of 560 acres, and the residence at 110 Hillcrest Road was sold for $220,000. Scenario B: The following additional information is available at the date of death: the estate only consisted of $15.000 cash, William Hughes was thrilled to receive the Kachina collection which was valued at $45.000, insurance policy number 14378 had a death benefit of $50,000, insurance policy number 48002 had a death benefit of $40,000, Riveredge Nature Center con- sisted of 160 acres, and the residence at 110 Hillcrest Road was sold for $220,000. Exercise 2 (L0 3. 4) Distribution of estate, taxable estate, and the resulting tax. Determine the correct value for each of the following questions: 1. Assuming that a single person has made taxable lifetime gifts of $1.2 million, what is the lar- gest taxable estate that could exist and still not incur any estate tax? 2. Helen made separate lifetime taxable gifts of $ 1.5 million and died leaving her entire $10 million estate to her husband George. Gcorge had made taxable gifts of $856,000 prior to Helen's death. In the year following her death, George made gifts of $50,000 to each of their four children. George died shortly after making the gifts leaving a taxable estate of 2-b4ab-d805824ec167/page/784ee803-4d7-432f-8415-4304800d904d ok: Advances Accounting QuickToPrim: Seach 90 Part 5 FOULARY ACCOUNTING $12 million, including the intact $10 million inherited from Helen. What is the net estate tax due on George's estate, assuming that the executor of Helen's estate elected to transfer any unused unified credit to George? 3. Given the facts in item (2) above, now assume that Helen had established a credit shelter trust in the amount of $3.840,000 for the benefit of her husband George, which is excluded from George's estate. What is the net estate tax due on George's estate? 4. Roger Pillsbury died leaving an estate consisting of the following: a 1984 Ford Mustang, a savings account of $40,000 at LaSalle Bank, and a parcel of land in Oklahoma that was sub- sequently sold for $195,000. His will stipulated that the Ford Mustang go to his brother Robert and that his sister Ann receive $60,000 from his savings account at LaSalle Bank. Per his will each of his six children were to receive $40,000, and the balance of his estate was to be given to the University of Oklahoma. What amount would Roger's sister receive from his estate? 5. Given the facts of item (4) above, assume that Roger had hoped that the University of Okla- homa would receive $100,000 from his estate. What would the land in Oklahoma have had to sell for in order for this to have been possible? Exercise 3 (104) Taxation of gifts. Determine the correct value for each of the following questions 1. Assume that an individual gives cash to the following partie: $25,000 to a charitable organi- zation, $15.000 to her grandson for his college tuition, $8,000 to her granddaughter to buy a car and S14,000 to her use for a trip to France. What amount of its is considered cabile Assume that an individual hasiven $25,000 to each of his four grandchildren for cach of the past three years and $50.000 charitable orization. If he wants to make a single uit each of the four guidebild w o uld he maximum gifter grandchild be in order to avoid all gift ? 22-b4ab-d805824ec167/page/784ee803-4dc7-432f-8415-4304800d904d m ! ok: Advanced Accounting Culex ou Pim: Search ASTRO from George's estate. What is the net estate tax due on George's estate? 4. Roger Pillsbury died leaving an estate consisting of the following a 1984 Ford Mustanga savings account of $40,000 at LaSalle Bank, and a parcel of land in Oklahoma that was sub sequently sold for $195,000. His will stipulated that the Ford Mustang go to his brother Robert and that his sister Ann receive $60,000 from his savings account at LaSalle Bank. Per his will, cach of his six children were to receive $40,000, and the balance of his estate was to be given to the University of Oklahoma. What amount would Roger's sister receive from his estate? 5. Given the facts of item (4) above, assume that Roger had hoped that the University of Okla- homa would receive $100,000 from his estate. What would the land in Oklahoma have had to sell for in order for this to have been possible? Exercise 3 (L04) Taxation of gifts. Determine the correct value for each of the following questions: 1. Assume that an individual gives cash to the following parties: $25,000 to a charitable organi zation, $15,000 to her grandson for his college tuition, $8,000 to her granddaughter to buy a car, and $14,000 to her spouse for a trip to France. What amount of gifts is considered taxable? 2. Assume that an individual has given $25,000 to each of his four grandchildren for each of the past three years and $50,000 to a charitable organization. If he wants to make a single gift to each of his four grandchildren, what would the maximum gift per grandchild be in order to avoid all gift tax? 3. Your client made the following gifts last year: S200,000 to each of her three children, $50,000 to her brother, and S10,000 to each of her cight grandchildren. Prior to that your client made a single gift of $50,000 to each of her two nieces. If she made a gift of $5,348,000 to her sister in the current year, what amount of gift tax would be due? 4. Assume the same facts as in item (3) above except that your client married during the current year prior to making the gift to her sister. Furthermore, assume that her spouse is a consent ing spouse for purposes of gifting to the sister and they both gave the gift to the sister The new spouse had prior taxable gifts of S100.000. What amount of gift tax would be due Exercise 4 TO 2 Distinguishing between principal and income. Receta wife an d away hive years , and she made Roger promise to continue to provide care for Sarah's sister Margaret Smith and let her live in their residence for a period of time, Roger and Sarah had no children and Margaret Smith was like a danghter to themRoper pued der/d0243ecd-6458-4d22-b4ab-d805824ec167/page/7afdod43-30db-4a86-9661-afc4a7f25830 e300k: Advances ACCOLTINE EXERCISES Exercise 1 (LO 3) Allocating legacies. Calvin Hughes's will provided for the following distributions: a. The 40-acre parcel in Leona, Wisconsin, is to be given to The Nature Conservancy along with $50,000. b. My 1970 GTO Pontiac convertible along with my 1937 Chevrolet pickup truck are to be given to the "Piston Auto Club" located in Slinger, Wisconsin. C. The collection of Zuni Kachina dolls is to be given to my nephew William Hughes. d. My Northwestern Mutual insurance policy number 14378 has named my son Calvin, Jr., as beneficiary. Policy number 48002 has named the estate as beneficiary. However, I want my sister Roberta and my brother Roger to each receive $30,000 from the policy proceeds. e. My residence at 110 Hillcrest Road is to be given to the Riveredge Nature Center located in Newburg, Wisconsin, provided that the center has not already grown to include more than 500 acres. f. My grandchildren, Riley, Corey and Toby, are to receive $50,000 each for the purpose of hopefully funding their college education. This bequest is not contingent upon their going to college or having already finished college & The balance of my estate is to be divided equally between my son Calvin, Jr., and my daughter, Susan Determine the amount of cash to be received by the decedent's grandchild Riley and his son Calvin Hughes, Jr., under each of the following scenarios: Scenario A: The following additional information is available at the date of death: the estate only consisted of $40,000 cash, William Hughes was deceased, the Kachina collection was sold for $45,000, insurance policy number 14378 had a death bencfit of $50,000, insurance policy number 48002 had a death benefit of $40,000, Riveredge Nature Center consisted of 560 acres, and the residence at 110 Hillcrest Road was sold for $220,000, Scenario B: The following additional information is available at the date of death: the estate only consisted of $15,000 cash, William Hughes was thrilled to receive the Kachina collection which was valued at $45.000, insurance policy number 14378 had a death benefit of $50,000, insurance policy number 002 had a death benefit of $40.000, Riveredge Nature Center con sisted of 160 acres, and the residence at 110 Hillcrest Road was sold for $220,000 Exercise 2 (10.0 Distribution of estate, taxable estate, and the resulting tax. ez cokdance Accounting 500 acres. Newburg, Wisconsin, provided that the center has not already grown to include more than f. My grandchildren, Riley, Corey and Toby, are to receive $50,000 each for the purpose of hopefully funding their college education. This bequest is not contingent upon their going! to college or having already finished college The balance of my estate is to be divided equally between my son Calvin, Jr., and my daughter, Susan Determine the amount of cash to be received by the decedent's grandchild Riley and his son Calvin Hughes, Jr., under each of the following scenarios: Scenario A: The following additional information is available at the date of death: the estate only consisted of $40,000 cash, William Hughes was deceased, the Kachina collection was sold for $45,000, insurance policy number 14378 had a death benefit of $50,000, insurance policy number 48002 had a death benefit of $40,000, Riveredge Nature Center consisted of 560 acres, and the residence at 110 Hillcrest Road was sold for $220,000. Scenario B: The following additional information is available at the date of death: the estate only consisted of $15.000 cash, William Hughes was thrilled to receive the Kachina collection which was valued at $45.000, insurance policy number 14378 had a death benefit of $50,000, insurance policy number 48002 had a death benefit of $40,000, Riveredge Nature Center con- sisted of 160 acres, and the residence at 110 Hillcrest Road was sold for $220,000. Exercise 2 (L0 3. 4) Distribution of estate, taxable estate, and the resulting tax. Determine the correct value for each of the following questions: 1. Assuming that a single person has made taxable lifetime gifts of $1.2 million, what is the lar- gest taxable estate that could exist and still not incur any estate tax? 2. Helen made separate lifetime taxable gifts of $ 1.5 million and died leaving her entire $10 million estate to her husband George. Gcorge had made taxable gifts of $856,000 prior to Helen's death. In the year following her death, George made gifts of $50,000 to each of their four children. George died shortly after making the gifts leaving a taxable estate of 2-b4ab-d805824ec167/page/784ee803-4d7-432f-8415-4304800d904d ok: Advances Accounting QuickToPrim: Seach 90 Part 5 FOULARY ACCOUNTING $12 million, including the intact $10 million inherited from Helen. What is the net estate tax due on George's estate, assuming that the executor of Helen's estate elected to transfer any unused unified credit to George? 3. Given the facts in item (2) above, now assume that Helen had established a credit shelter trust in the amount of $3.840,000 for the benefit of her husband George, which is excluded from George's estate. What is the net estate tax due on George's estate? 4. Roger Pillsbury died leaving an estate consisting of the following: a 1984 Ford Mustang, a savings account of $40,000 at LaSalle Bank, and a parcel of land in Oklahoma that was sub- sequently sold for $195,000. His will stipulated that the Ford Mustang go to his brother Robert and that his sister Ann receive $60,000 from his savings account at LaSalle Bank. Per his will each of his six children were to receive $40,000, and the balance of his estate was to be given to the University of Oklahoma. What amount would Roger's sister receive from his estate? 5. Given the facts of item (4) above, assume that Roger had hoped that the University of Okla- homa would receive $100,000 from his estate. What would the land in Oklahoma have had to sell for in order for this to have been possible? Exercise 3 (104) Taxation of gifts. Determine the correct value for each of the following questions 1. Assume that an individual gives cash to the following partie: $25,000 to a charitable organi- zation, $15.000 to her grandson for his college tuition, $8,000 to her granddaughter to buy a car and S14,000 to her use for a trip to France. What amount of its is considered cabile Assume that an individual hasiven $25,000 to each of his four grandchildren for cach of the past three years and $50.000 charitable orization. If he wants to make a single uit each of the four guidebild w o uld he maximum gifter grandchild be in order to avoid all gift ? 22-b4ab-d805824ec167/page/784ee803-4dc7-432f-8415-4304800d904d m ! ok: Advanced Accounting Culex ou Pim: Search ASTRO from George's estate. What is the net estate tax due on George's estate? 4. Roger Pillsbury died leaving an estate consisting of the following a 1984 Ford Mustanga savings account of $40,000 at LaSalle Bank, and a parcel of land in Oklahoma that was sub sequently sold for $195,000. His will stipulated that the Ford Mustang go to his brother Robert and that his sister Ann receive $60,000 from his savings account at LaSalle Bank. Per his will, cach of his six children were to receive $40,000, and the balance of his estate was to be given to the University of Oklahoma. What amount would Roger's sister receive from his estate? 5. Given the facts of item (4) above, assume that Roger had hoped that the University of Okla- homa would receive $100,000 from his estate. What would the land in Oklahoma have had to sell for in order for this to have been possible? Exercise 3 (L04) Taxation of gifts. Determine the correct value for each of the following questions: 1. Assume that an individual gives cash to the following parties: $25,000 to a charitable organi zation, $15,000 to her grandson for his college tuition, $8,000 to her granddaughter to buy a car, and $14,000 to her spouse for a trip to France. What amount of gifts is considered taxable? 2. Assume that an individual has given $25,000 to each of his four grandchildren for each of the past three years and $50,000 to a charitable organization. If he wants to make a single gift to each of his four grandchildren, what would the maximum gift per grandchild be in order to avoid all gift tax? 3. Your client made the following gifts last year: S200,000 to each of her three children, $50,000 to her brother, and S10,000 to each of her cight grandchildren. Prior to that your client made a single gift of $50,000 to each of her two nieces. If she made a gift of $5,348,000 to her sister in the current year, what amount of gift tax would be due? 4. Assume the same facts as in item (3) above except that your client married during the current year prior to making the gift to her sister. Furthermore, assume that her spouse is a consent ing spouse for purposes of gifting to the sister and they both gave the gift to the sister The new spouse had prior taxable gifts of S100.000. What amount of gift tax would be due Exercise 4 TO 2 Distinguishing between principal and income. Receta wife an d away hive years , and she made Roger promise to continue to provide care for Sarah's sister Margaret Smith and let her live in their residence for a period of time, Roger and Sarah had no children and Margaret Smith was like a danghter to themRoper pued